When the Interest Rate in the U

question 317

Multiple Choice

When the interest rate in the U.S. increases as a result of contractionary monetary policy, investment spending _____ and consumption _____ .

• A)increases; increases
• B)increases; decreases
• C)decreases; increases
• D)decreases; decreases

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Definitions:

Appreciate the Dollar

The increase in value of the US dollar relative to other currencies, leading to increased purchasing power internationally.

Demand for Pesos

The desire or willingness of market participants to acquire Mexican pesos, influenced by factors like investment returns and currency stability.

Supply of Pesos

The total amount of Mexican Pesos available in the financial markets, influenced by factors such as monetary policy and economic conditions.